"The short answer," says Cape (CIU) chief executive Joe Oatley when asked whether his company's oil and gas end markets are improving, "is no." As more than half of the critical industrial service provider's sales come from the sector, it's little wonder that half-year results look so painful. A double-digit increase in revenue was one of the few bright spots in a period where adjusted operating profits declined 25 per cent, leading to a 220 basis point margin contraction.
Were it not for the full contribution of Redhall Engineering, the downstream-focused maintenance group Cape acquired last May, that revenue figure would likely have also declined on weak UK trading. Clients' ongoing deferral of discretionary spending resulted in a 27 per cent drop in order intake to £162m in the region, while the five-year contract to shut down ExxonMobil's refinery at Fawley has underperformed on a commercial basis.
Further afield, profits are holding firm. Although the Middle East accounted for less than a quarter of sales in the period, the region contributed almost half of adjusted operating profits, owing to robust demand in Saudi Arabia and a ramp-up in construction work in Kuwait.
Analysts at Numis expect full-year reported pre-tax profits of £22.2m and EPS of 14.4p, against £29.1m and 12.7m in the 12 months to December 2015.
CAPE (CIU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 183p | MARKET VALUE: | £221m | |
| TOUCH: | 179-181p | 12-MONTH HIGH: | 261p | LOW: 176p |
| DIVIDEND YIELD: | 7.7% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 115p* | NET DEBT: | 79% | |
| Half-year to 3 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015** | 360 | 17.6 | 10.5 | 4.5 |
| 2016 | 396 | 1.4 | 0.1 | 4.5 |
| % change | +10 | -92 | -99 | - |
Ex-div: 8 Sep Payment: 7 Oct *Includes intangible assets of £146m, or 121p a share. **For the period ended 5 July | ||||
